In a troubling sign for the U.S. economy, a plurality of small businesses reported a drop in revenue last year, the first such decline since the earlier stages of the pandemic.
That's according to the
The results marked the first time since 2021 that the report found more firms reporting a decrease than an increase.
"The data shows that small businesses in aggregate are having less success in growing revenues," said Hal Martin, a policy economist at the Cleveland Fed and the survey's director.
The researchers polled thousands of small employers across all 50 states, and found growing difficulties in many areas. Reaching customers and growing sales was the top operational challenge, cited by 57% of businesses, which was up from 53% the year before.
Many other concerns grew more widespread as well. Fifty-six percent of firms had trouble paying operational expenses, up from 52% in 2023. Fifty-one percent complained of uneven cash flow, up from 49% the year before. And 48% of businesses complained of weak sales, up from 44% the prior year.
The survey's findings reflect two challenges that plagued the U.S. economy in 2024: stubborn inflation and historically high interest rates. For banks that lend to small businesses, it's become a familiar combination.
"In 2024, many of the small businesses we serve, particularly across the New York metro area, faced a complex operating environment shaped by sustained high interest rates, selective credit conditions and inflation-related cost pressures," said John Buran, CEO of Flushing Bank in New York.
Buran added that in spite of these pressures, Flushing's clients showed a "high level of resilience."
Overall, the Fed survey found that 19% of small businesses were growing in 2024. That was down from 22% in both the 2022 and 2023 surveys — and far below the levels recorded before the COVID-19 pandemic. In 2019, for example, 30% of firms were still growing.
"In the post-pandemic years, we have not risen above the point that we were at in the pre-pandemic years," Martin said. "So I think it's very in keeping with the post-pandemic trend here, that revenue performance has not risen back to pre-pandemic goals."
The Fed survey was conducted from September to November 2024. As a result, it does not capture the effects of President Donald Trump's turbulent first two months in office, which included
However, the report does shed light on a number of economic obstacles that have persisted well into 2025. The single most common financial concern, for example, was the rising cost of goods, services and wages — 75% of small businesses cited this as a challenge.
That pressure has not gone away. In November 2024, when the survey was conducted, the consumer price index was rising at 2.7% year over year. The most recent CPI data, from February this year, showed it rising at 2.8%.
As 2025 progresses, Buran said, not all costs for small businesses are rising, but some are still quite high.
"Many supply-side pressures have moderated," he said. "However, labor remains a key input cost for service-based businesses, particularly in sectors with ongoing hiring challenges."
As for 2024, Martin was quick to note that while some concerns grew more severe, others became less prevalent. For example, 29% of firms reported supply chain issues last year — down from 41% in 2023.
Overall, Martin called the survey's findings "a mixed story" for U.S. small businesses.
"The data I have before me really speaks to some challenges increasing, some challenges receding by modest amounts," he said.
